Japan consumer prices drop for 5th straight month

TOKYO--Japanese consumer prices continued to fall in July, suggesting that the Bank of Japan may have to act again in a bid to spark inflation in the world's third-largest economy.

The core consumer price index--which excludes fresh food--slid 0.5% on year in July, following a revised 0.4% drop in June. That was worse than a 0.4% fall forecast by The Wall Street Journal and the Nikkei. Electricity and gasoline were among the items falling in price, weighing on the index.

The core figure is an important gauge of government and central bank success in the campaign to end years of on-and-off deflation. Japanese politicians and BOJ officials blame deflation for pulling down wages, consumption and depressing growth.

Friday's figures, showing a fifth straight monthly fall in prices, indicate that the bank is still struggling to generate inflation three years after launching and then expanding a massive easing program to reach its 2% inflation target.

BOJ Governor Haruhiko Kuroda has blamed the falls in prices on weakness in global energy prices since 2014 and has said "the overall price trend is steadily improving."

Stripping out energy prices and food, consumer prices rose 0.3% on year, compared with a revised 0.5% increase in June. The bank will release its own gauge of prices excluding energy and fresh food later in the day.

Other factors seen weighing on prices are feeble domestic consumption and a strengthening of the yen. A lack of significant growth in wages has denied domestic demand of an expected shot in the arm. The reversal of the yen's depreciation has meanwhile removed a source of upward pressure on prices and will increasingly add to downward pressure as imports become cheaper over coming months.

Based on the falling price data in recent months, many economists and investors expect the central bank will add to its easing program in coming months. In an August survey of economists by the Japan Center for Economic Research, over half of the 39 respondents expected the BOJ to ease in either September or October.

July's CPI figures were calculated using a 2015 base, leading to some discrepancies with the previous month's data using a 2010 base.

Write to Eleanor Warnock at eleanor.warnock@wsj.com

Corrections & Amplifications

This item was corrected at 2353 GMT to show that electricity, not accomdation, was among items falling in price.

Electricity and gasoline were among the items falling in price. "Japan Consumer Prices Fall for Fifth Straight Month," at 2339 GMT, misstated the first falling item in the second paragraph.

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